Real estate: Building Minister Klara Geywitz extends funding programs

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Property for sale: impulses for the real estate market

Photo: Jan Woitas/dpa

Federal Construction Minister Klara Geywitz has continued state funding for climate-friendly new construction and age-appropriate conversion of apartments. The SPD politician expects this to provide impetus for housing construction and the sluggish economy. Every euro in funding triggers orders from craftsmen and stimulates the domestic economy, said Geywitz. She also called on the Union to no longer hold up the Growth Opportunities Act with the planned new degressive depreciation in new residential construction in the Mediation Committee of the Bundestag and Bundesrat.

According to Geywitz, applications can be submitted again to the state development bank KfW for reduced-interest loans and grants from Tuesday. This involves climate-friendly new construction, age-appropriate renovations and cooperative living. Last year, the climate-friendly new construction program supported over 47,000 apartments. The interest rate for KfW loans in the program will be 2.1 percent as of Tuesday. This is well below the usual market interest rates.

The federal government is planning these funding programs

Climate-friendly new buildings (KFN) section open

Both private individuals and housing companies can benefit from the funding, provided they build a so-called Efficiency House 40. Such houses only use 40 percent of the energy that a standard house requires. Builders can apply for a reduced-interest loan of up to 100,000 euros per residential unit; with a special sustainability seal, up to 150,000 euros are available.

However, fossil fuel heating must not be part of the plan. Neither is a fireplace. The program budget for 2024 is 762 million euros - similar to what was originally planned last year. At that time, however, the pot had to be increased by another billion euros due to high demand. It is still unclear whether there will be enough scope this year too.

Home ownership for families (WEF) section expand

Federal construction funding for low- and middle-income families has been in place since June 2023, and further improvements are planned for the coming year.

The basics of the program: The taxable annual income may not be more than 90,000 euros. For families with two children, the sum increases to 100,000 euros, and for each additional child by 10,000 euros. Attention: The taxable income is always slightly lower than the gross income.

The money from the program flows to the applicants indirectly in the form of an extremely low-interest KfW loan. The interest rate of less than 1 percent can be as of 1. March will even be fixed for 20 years.

A loan of up to 170,000 euros is possible. Houses purchased or built with a quality seal for sustainable buildings allow the loan to be increased by a further 50,000 euros. Of course, climate-friendly construction is mandatory - efficiency standard 40 is the measure of all things. The budget has earmarked 350 million euros for this program this year.

AreaJung buys old fold-outs

Anyone who is considering buying an old building instead of a new building on a greenfield site can also take advantage of funding in 2024. The target group here should also be families with underage children. The exact requirements have not yet been determined, but the budget has: 350 million euros, which sounds less than it is - the money is intended to subsidize the interest rate in a similar way to the home ownership program for families.

From a public sector perspective, the program kills two birds with one stone. In many smaller cities and communities, residential buildings in central locations are empty. For new development areas on the outskirts of the city, communities also have to meet expensive requirements. “Young buys old” helps to conserve resources and brings life back to the city centers.

AreaCommercial to Residentialopen

From the perspective of the federal government, the program pursues a similar goal to the “Young Buys Old” program. In this case it is about commercial and office space that is no longer needed and is to be converted into living space. Experts see enormous potential here. Thousands of new apartments could be created, especially in densely populated metropolitan areas.

Since the relevant projects are very large, the program is initially aimed primarily at housing companies. But the savings should ultimately also benefit buyers who want to buy condominiums there. The program is scheduled to start in autumn 2024, and 120 million euros are planned.

AreaDegressive AfAopen

A new regulation of the tax depreciation options could also help to stimulate new construction and have an overall effect on prices. In August, Geywitz announced a degressive depreciation rate of 6 percent. This means that investors will have improved opportunities to deduct construction costs in the future, free of restrictions on apartment size, rent levels or energy efficiency.

However, the states do not want to bear the loss of revenue that they will suffer and refused the Bundesrat's approval of the law passed in the Bundestag in November. Now the mediation committee has to find a compromise.

AreaClimate-friendly new building in the low-price segment (KNN)open

The latest funding program is primarily intended to promote the construction of small rental apartments, for example for pensioners and single parents or students. It has not yet been formulated in detail, but what is certain is that the Efficiency House 40 will once again be defined as the standard. However, it is possible that compromises in construction standards will be accepted in order to keep costs within limits. In any case, the rents should be in the lower to medium price range.

The program is scheduled to launch this year and run for several years. The investors are to be supported with a total of one billion euros. If Geywitz prevails over her cabinet colleagues, more money could follow in 2025. But the negotiations are likely to be difficult. The next budget will probably be at least as competitive as the one for 2024.

Age-appropriate renovations can also continue to receive subsidies. Last year, around 31,000 apartments and houses were freed from barriers by lowering step thresholds or converting bathtubs into showers. In addition, cooperatives would be funded with 15 million euros in 2024.

“We are spending billions to promote social housing, but we also need tax cuts for privately financed housing,” said Geywitz. It is time for additional, declining depreciation in residential construction.

This is part of the Growth Opportunities Act, which the Mediation Committee of the Bundestag and Bundesrat will discuss on Wednesday evening. To achieve this, the traffic light coalition relies on votes from Union-led state governments in the state chamber. Union politicians have recently made their approval dependent on the traffic light withdrawing its plans to gradually abolish tax refunds for agricultural diesel. This is currently not apparent.

The Rhineland-Palatinate Prime Minister Malu Dreyer (SPD) therefore accused the Union of blocking the plans. With the Growth Opportunities Act, a good agreement proposal is on the table, which is about immediately effective, unbureaucratic growth impulses with a volume of over three billion euros per year. "But it's not the countries that are blocking, it's just the Union countries," said the SPD politician.

The new declining depreciation for wear and tear (Depreciation) should apply to apartments and residential buildings with construction starting in October 2023 and until the end of September 2029. An informal working group of the Mediation Committee had agreed that five percent of the acquisition and production costs could be written off for six years.

mik/Reuters